We saw this coming. The Reserve Bank of India (RBI) has again enforced “new rules” onto the Paypal accounts, because of which, PayPal team were forced to revise its user agreement with the Indian PayPal account holders. These new rules shall be effective from 1st March, 2011.

To ensure the observance of laws and rules in India, the amended agreement was put forth by the RBI against the PayPal users. The drastic changes states that Indian PayPal users should transfer all their received money from PayPal account to the Indian bank account within 7 days from the receipt of confirmation from the buyer in respect of the good or services. — as said previously, this is operative from 1st March, 2011.

Another major restriction put to force is that Indian users cannot buy goods from their PayPal account. Sadly, all the online shoppers who use PayPal primarily to make purchases have to comply with this guideline, and the only way to buy from e-commerce websites is to transfer your money from PayPal account to the bank account.

And to make things worse, there is a limit for online merchants on each transaction, that is, all the export-related payments for goods and services into our PayPal account shouldn’t exceed $500.

It is important to know that these restrictions were imposed by the RBI — not by the PayPal. Clearly we, the Indian PayPal users, have a bumpy ride after the new rules are in action. Although it is unpredictable to know if there will be any changes in the user agreement in the coming weeks, but, in my opinion, I highly doubt if PayPal can loosen up the situation. For now, RBI is definitely ruling the game with its iron fist.

From the statistical data of 2009, over 170,000+ active PayPal accounts existed in India alone. And, with the newly enforced restrictions from the RBI, PayPal is going to lose the grip over the customers and all we can do is to sit on the fence with the hopes that things are taking a turn for the better. What can do we anyway?

PayPal Faces New Restrictions in Indiahttp://www.pcworld.com/article/218182/paypal_faces_new_restrictions_in_india.html
“PayPal does not have authorization in India to provide cross-border money transfers, a spokeswoman for the RBI said at the time. PayPal needs authorization to operate a cross-border money transfer service, under the country’s Payment and Settlement Systems Act, 2007, and it does not have it, she added.

PayPal is still not included in a list of payment system operators authorized under the Act, that was released by RBI on Jan. 18.”

RBI is not enforcing New rules. The RBI is enforcing Existing rules that PayPal has chosen to ignore for three years.